Longer-term deflation probabilities level off

Prices of Treasury Inflation-Protected Securities (TIPS) with similar maturity dates can be used to measure probabilities of a net decline in the consumer price index over the five-year period starting in early 2011. One measure of this deflation probability was 16 percent on September 21, unchanged from a week earlier. This deflation probability has leveled off after increasing from 12 percent to 18 percent in the first three weeks of August. An alternative lower bound on the probability of deflation was 1 percent on September 21, also unchanged from a week earlier.